Mutual Fund
Definition
A pooled investment vehicle managed by a professional fund manager that buys a diversified portfolio of stocks, bonds, or other securities. Unlike ETFs, mutual funds are priced once daily at market close.
Related Terms
ETF (Exchange-Traded Fund)
A basket of securities that trades on a stock exchange like an individual stock. ETFs typically track an index, sector, or strategy. They offer diversification, low fees, and tax efficiency. Examples: VOO (S&P 500), QQQ (NASDAQ), VTI (Total Market).
Expense Ratio
The annual fee charged by a fund (ETF or mutual fund) expressed as a percentage of assets. A 0.03% expense ratio means you pay $3 per year per $10,000 invested. Low-cost index funds often have expense ratios under 0.10%.
Index Fund
A mutual fund or ETF designed to track the performance of a specific market index like the S&P 500. Index funds offer broad diversification, minimal management, and very low fees. Warren Buffett recommends them for most investors.
Get Smarter About Investing
Free weekly market insights, calculator updates, and investing education.